The present invention generally relates to loyalty transactions and, more specifically, to a network centric loyalty system that offers a multitude of network-centric loyalty programs and loyalty transactions.
Loyalty programs are programs that provide customers with incentives to perform transactions at certain merchants participating in the loyalty programs. Typically, customers are awarded incentives under a loyalty program when they perform transactions at the merchants participating in that loyalty program. The incentives may then be redeemed instantly or at a later time. Generally, loyalty programs are typically deployed on loyalty systems based on either a merchant-centric model or an issuer-centric model.
Generally, in the merchant-centric model, a merchant operates a closed loyalty program. The merchant defines all incentives to be issued within the program and issues portable consumer devices, such as smart cards, that identify a cardholder to the system when shopping in the merchant's stores. The merchant-centric loyalty systems are generally designed to generate additional purchase volume for a single merchant. Additionally, the merchant-centric system operates a proprietary, closed program because it is essential to the business model to maintain tight control over all program participants and to restrict the variety of incentives in order to manage the overall costs to the program sponsor.
In the issuer-centric model, multiple relationships are established with the various entities that are capable of adding values to a loyalty points pool available to a cardholder of a single issuer. In general, points can be redeemed only through the issuer. Issuer-centric loyalty systems are generally designed to provide points or incentives to registered cardholders in order to create an incentive for the cardholders to use the single issuer's services and/or the facilities of the issuer's partners that offer complementary products or services.
Both the issuer-centric and merchant-centric models have their respective drawbacks. For example, a merchant-centric model does not support multiple card issuers or other merchants and loyalty only benefits the merchant who funds the infrastructure, not the issuer. Additionally, because a merchant funds the startup cost of the loyalty system infrastructure and operations as well as all of the incentives, a loyalty program is generally limited to discounts on distinct products that can be readily stockpiled in anticipation of incentive redemption under the loyalty program.
In the issuer-centric model, multiple card issuers must fund the entire costs of infrastructure, have limited transaction information, must acquire and contract with acceptance point providers and cannot easily migrate from existing programs but must restart from scratch. Also, there is very little incentive to provide the flexibility for other participants to craft and offer customized incentives. With similar limited benefits to participants, the issuer-centric model offers loyalty benefits only to the issuer, not the merchant.
Additionally, loyalty only benefits the issuer or merchant but does not benefit any third party such as manufacturers other merchants or operators. The third party may include transaction acquirers and credit card associations. As a result, cross-loyalty program participation cannot be easily accommodated. Also, both models provide only minimal ability for participants to offer incentives that have been customized for a cardholder, a segment of cardholders, or specific group of acceptance point terminals.
Hence, it would be desirable to provide a more robust and flexible model for loyalty programs.